Greenspan vs. Geithner in 'weak dollar' debate

By Aaron Smith, staff writerNovember 11, 2010: 10:32 AM ET

NEW YORK (CNNMoney.com) -- Alan Greenspan, former chairman of the Federal Reserve, and U.S. Treasury Secretary Timothy Geithner locked horns Thursday over whether the Obama administration is supporting a weak dollar to bolster the economy.

Greenspan, in an op-ed piece in the Financial Times, claimed that the U.S. government is deliberately weakening the dollar, while Geithner asserted in an interview with CNBC that "the U.S. would never do that."

In the FT piece, Greenspan wrote, "The suppression of the renminbi (China's yuan) and the recent weakening of the dollar are, of necessity, producing firming exchange rates in the rest of the world to, as they see it, the rest of the world's competitive disadvantage."

Greenspan's mention of the Chinese currency relates to U.S. critics' belief that China is keeping the yuan artificially low by hoarding reserves, keeping its exports cheap and undercutting international competitors. Geithner recently visited China, which had been letting its currency rise gradually against the dollar -- a pace some in the West believe is too slow.

Geithner, who is attending the Group of 20 meeting that started Thursday in Seoul, South Korea, denied that the United States is deliberately weakening the dollar.

"We will never seek to weaken our currency as a tool to gain competitive advantage or to grow the economy," he told CNBC.

The dollar has plunged in recent months, dropping 12% against the Japanese yen and 18% against the euro since early June.

On Thursday, the dollar slipped slightly versus the British pound, but climbed slightly versus the Japanese yen and rose 0.5% against the euro.

"The U.S. dollar is little changed against most of the major foreign currencies and is mostly firmer against the emerging markets," said Marc Chandler, currency analyst for Brown Brothers Harriman, in a Thursday note.

Chandler said the euro is an exception that "while holding above yesterday's lows, continues to struggle to sustain even modest upticks."

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